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Secretary of Defense Fellows Program 1997- 1998
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SDFP Background

• Infrastructure 2/3 of Defense Budget
• Business practices reform generates savings
• Savings applicable to shortfalls
• Businesses outside DoD successful in
• Adapting to changing global environment
• Exploiting information revolution
• Structural reshaping/reorganizing
• Developing innovative processes
• DoD needs effective access to best business
  practices

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SDFP Organization

• Permanent Staff- SDSSG Director, Deputy, Admin
  Staff
• Two officers from each Service (USMC one)- High
  flag/general officer potential- O-6 or O-5-
  Senior Service College credit
• Ten months at Sponsoring Company
• Group Education- Seminars- Wargames

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SDFP Objectives

• Final Report and Briefing to SecDef/Services
• Business insights relevant to DoD
  culture/operations
• Recommended process/organization changes
• Build a cadre of future leaders who
• Understand more than the profession of arms
• Understand adaptive and innovative business
  culture
• Recognize organizational and operational
  opportunities
• Understand skills required to implement change
• Will motivate innovative changes throughout career

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SDFP Sponsors

• 96- Prior
• American Management Systems, CNN,
  CITICORPHewlett-Packard, Lockheed Martin, Loral,
  McDonnell Douglas, Microsoft, Oracle,
  Northrop Grumman, Sarnoff Labs
• 97- 98
• Andersen Consulting, DIRECTV, Mobil, Northrop
  Grumman, Sears, Southern Company
• 98- 99
• Boeing, Caterpillar, Cisco Systems, Netscape,
  Coopers Lybrand, Raytheon Systems

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SDFP Results

• Program objectives fulfilled- Education,
  education, education
• - More sponsors than fellows
• - Inter/intra-group experience sharing
• Unique corporate experiences- Strong corporate
  support - Executive/operational level mix-
  Mergers/restructuring

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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Andersen Consulting
Secretary of Defense Fellows Program

• Global Consulting Firm
• 46 countries over 53K Employees
• 1997 growth 20 revenue 6.6B
• Organization
• Core Competencies
• Strategy
• Process
• Change Management
• Technology
• 16 Global Market Units
• Aligned with specific industries (e.g.
  Communications)
• Cross-functional/ Industry Solution Centers

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Andersen Consulting
Secretary of Defense Fellows Program

• Business integration approach
• People Process Technology Capability
• Changes in one factor affects all others
• Focus on aligning capability with strategy
• Change Management
• Its a Journey
• What is the destination?
• Are we ready to embark?
• Chart the course
• Reassess along the way- change course if needed
• Identify potential obstacles manage the journey
• Rule of the Road 1 Change is Painful!

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Andersen Consulting Observations/Recommendations
Secretary of Defense Fellows Program

• Infrastructure
• Extensive intranet/ Mobile Computing
• World-wide access- work anywhere
• Flexibility minimizes lost productivity
• Virtualization
• All admin/personnel mgt... functions Paperless
• Knowledge Xchange
• 6000 databases
• Access to firms knowledge capital
• Provides forum for communities of practice

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Andersen Consulting Observations/Recommendations
Andersen Consulting Observations/Recommendations
Secretary of Defense Fellows Program

• Develop a clear technology vision/strategy
• Ensure organization has requisite skills or
• Partner/Outsource
• Common standards/ protocols
• A must for eCommerce
• Emerging tech support solutions
• eCommerce
• Electronic procurement
• Business training simulation tools
• Human performance improvement
• Networked collaboration
• Workplace-of-Future

• Technology Integration

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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DIRECTV

• Fastest growing consumer electronics product in
  history
• 3.5 Million subscribers in 3.5 years
• 1200 employees 1997 revenue 1.1B
• Direct Broadcast Satellite television
• 175 channels, all digital, 24h x 7d operations
• Three geosynchronos satellites
• Information Technology Department
• Critical Business Systems
• Data Center construction
• Billing operations

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DIRECTV Observations

• Virtual business -- Mostly outsourced
• Customer service
• Hardware/retail sales
• Billing/remittance
• Outsourcing
• Rationale
• Have agility
• Gain capability
• Avoid costs
• Dont outsource core competencies
• Understand risks

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DIRECTV Observations

• Y2K Problem
• Business government behind
• Planning focus too narrow
• Best case (things will work) assumed v. worst
  case
• Systems-level effects
• Electric power utilities
• Embedded processors
• Rail systems
• Global financial system
• Local, state Federal governments

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DIRECTV Recommendations

• Have realistic expectations for outsourcing
• Know what you need want
• Contract carefully -- Be vigilant
• Be prepared to pay -- Outsourcing is not cheap
• Y2K Problem
• Begin scenario based planning
• Look at macro systems level impacts
• Assume worst case scenarios

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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Mobil Corporation

• Global petroleum company
• 125 countries 43K employees
• 1997 revenue 3.3B
• Core competencies
• Exploration/production
• Marketing/refining
• Chemicals
• Major issues
• Low margins/increased competition
• Environment/geo-political risks
• Diminishing technical skills
• Aging US-centric workforce

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Mobil CorporationObservations/Recommendations

• Standard Managed Info Tech Environment
• Common operating systems
• Standardized hardware/software
• Organizations share best practice processes and
  improvements
• Single point for problem resolution
• Platform for growth
• Significant cost reduction

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Mobil CorporationObservations/Recommendations

• Knowledge Management
• Maximizes return on intellectual capital
• Levels
• Deriving value from knowledge (mining)
• Generating new knowledge (creation)
• Continuous learning (updating)
• Key components
• People networks
• Supporting computer technologies
• Why
• Limited resources
• Experts leveraged

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Mobil CorporationObservations/Recommendations

• Outsourcing
• No Silver Bullet
• Enhance core competencies -- Dont replace
• Commitment and buy-in is key
• Fully understand
• Current status -- Dont outsource a mess
• Current in-house costs
• Does vendor provide more effective service
• Know when to say No!
• Do what is best for organization

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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Northrop Grumman ESSD

• One of five NG major divisions
• Formerly Westinghouse Defense Electronics
• Electronic Sensors Systems Division
• 11,000 employees
• 200 key programs 3500 contracts
• Radar expertise forte
• Corporate Crown Jewel
• Cutting edge technology
• Key components of advanced weapon systems

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Northrop Grumman ESSD Observations/Recommendations

• Post acquisition restructuring goals
• Eliminate excess infrastructure
• More efficient use of resources
• Capitalize on embedded resources and disciplines
• Homeroom model for achieving goals
• Centralized base of operations for personnel
• Develops functional skills/tools/services/processe
  s
• Administers training, career development
• Manages talent pool

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Northrop Grumman ESSD Observations/Recommendations
Northrop Grumman ESSD Observations/Recommendations

• Homeroom Benefits
• Standardized processes
• Leveraged use of tools
• Effective use of personnel
• No added overhead
• DoD application
• Joint warfighting CINC development
• Benefits
• Develop/track future commanders
• DoD-wide view of talent
• Centralized quality control/standardized
  processes
• Common joint commander perspective

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Northrop Grumman ESSD Recommendations

• Acquisition Reform
• Progress -- Huge thumbs up
• Market Pricing next step
• Move from Contract Cost Pricing
• Cost Pricing rigorous, detailed accounting
• After development, Pre-production, LRIP
• Market Pricing Commercial Practice
• Saves
• Eliminates excessive infrastructure
• Government and industry

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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SEARS ROEBUCK CO.
Secretary of Defense Fellows Program

• Large, complex, full service retailer
• 3,200 stores 300K associates nationwide
• 60M households
• Retail Industry Leader
• Customer database management innovator
• Sears Logistics Group
• Tailored logistics solutions
• Paradigm Flow -- Dont store
• Total logistics chain visibility
• Sears horizontal strengths leveraged

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SEARS ROEBUCK CO. Observations/Recommendations
Secretary of Defense Fellows Program

• Build a winning culture
• Employee ownership the key!
• Relate pay/benefits to business strategy
• Goal sharing/performance bonuses
• Admit mistakes handle quickly
• Reputation built on trust integrity
• Foster climate of innovation
• Manage for long term w/ short term goals

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SEARS ROEBUCK CO. Observations/Recommendations
Secretary of Defense Fellows Program

• Strategic vision
• Top-down adaptive planning
• Clear concise guidance
• Multiple, interwoven plans
• Balanced objectives
• Information systems the glue
• Focus on meeting changing customer needs

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SEARS ROEBUCK CO. Observations/Recommendations
Secretary of Defense Fellows Program

• People
• Military cannot compete w/ compensation
• New paradigm needed
• Vendors
• Strategic partnerships, cooperative solutions
• Expand outsourcing
• Non-core capabilities
• Technology
• Apply, integrate -- Dont chase

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SDFP Fellows

• CAPT Mark Adrick Andersen Consulting
• Col Mike Marro DIRECTV
• COL Larry Matthews Mobil Corporation
• Col(Sel) Janet Therianos Northrop Grumman
• Col(Sel) Andy Frick Sears Roebuck
• CAPT Linda Nagel Southern Company

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Southern Company

• Vertically integrated holding company
• Five Southeast US electric utility companies
• Largest US electricity producer most profitable
• Diversified, unregulated companies (e.g. gas)
• 29,000 employees
• Preparation for re-regulation competition
• Acquiring generating capacity/commercial
  customers throughout US.
• Global presence in six countries
• 4 in worldwide generating capacity
• Marketing and trading energy as a commodity

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Southern Company Observations

• Massive, top-down driven culture change
• Shift from managing assets to satisfying
  customers
• Attempting to quantify impact on revenue from
  increasing customer satisfaction
• Streamlining business planning
• Tighten link of company goals to budget process
• Five year budget, three year emphasis

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Southern Company Observations

• High emphasis on shared goals tied to pay
• Tighten link of company goals to individual
  performance, evaluation and compensation
• Link improvement in customer satisfaction to pay
  via incentives
• Implied contract with employees re-written
• No longer job for life
• Must be flexible
• job description
• location
• hours

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Southern CompanyRecommendations

• Reward TEAMWORK, not just individual performance
• Family of performers, not family for life
• Review processes, dont just automate
• Shared services for common processes
• Travel, personnel, C4I
• Dont duplicate management at both Services and
  DoD level
• Outsource very carefully

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SDFP Common Observations/Recommendations

• Y2K Problem
• Primes OK Subs and Overseas way behind
• Legal liability a growing roadblock
• Major disruptions likely contingencies required
• R D
• Critical to longevity
• fenced
• Innovation
• Risks taken
• Failed experiments expected
• Not career threatening

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SDFP Common Observations/Recommendations

• Change management plan a must
• Determine actual processes first
• Educate and empower employees in changes
• Multi-year process leadership continuity
  critical
• Incentives
• An absolute for change
• Fear not enough benefits must be shared
• Internal Organization
• Flexible/dynamic structure
• Collaboration/Teaming
• Info tech the enabler

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SDFP Common Observations/Recommendations

• Information Technology
• Lease to maintain state of the art
• Enterprise-wide architectures/protocols a must
• Enabler for common admin function processes
• Paperless/deskless/virtual when sensible
• Strategic Planning/Vision
• Topdown, not bottom up
• Fiscal Planning
• 18-36 months max

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SDFP Common Observations/Recommendations

• Outsourcing
• Determine core business key - dont outsource
• Demographic imperatives
• Workforce shortage
• Industry increasingly forced to educate
• Growing competition with military for skills
• Partnerships/Teaming
• Trust, sharing -- Not adversarial
• Culture
• High employee value compensated